Interest rates are going down for an extended period. How long are you expecting it to last?
The home loan interest rates have been moving southwards in the last few months. Just 18 months back home loan interest rates were hovering on 8 per cent. The adoption of EBR as the benchmark for interest rates has led to a significant dip in interest rates of around 60 bps.
The present low levels of interest reflect the liquidity overhang in the economy on account of various measures taken by the government to help the economy sustain in challenging times. The lower interest rates have, in fact, helped in driving the housing loan business in metros as well as other centres. I believe that the lower interest rate regime would continue for some more time.
The attractive rate of interest and the freebies from the developers have boosted the sentiment in the real estate market and consequently the home loan portfolio of lenders including SBI.
Do you think the decline in interest rates will have a positive impact on the real estate sector?
Since the decision to invest in a residential home is a major financial decision taken once in a lifetime, the interest rate plays a pivotal role as it is a long-term liability for individuals. The home loan segment has a 25 to 30-year repayment commitment, a small cut in interest rates results in substantial savings over the life of the loan. The reduction of interest rates in the recent past, therefore, has changed the market dynamics in favour of prospective homeowners.
This story is from the April 2021 edition of Outlook Money.
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This story is from the April 2021 edition of Outlook Money.
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